Out to Pasture: Is a Whole New Agricultural Industry Ahead?

The Department of Justice (DOJ) hearings on competition in the agriculture sector begin in March. When they are over, we may be selling cattle in a whole new industry.

Put yourself in President Obama's fancy Italian shoes. What would you do? You're afraid you're losing your base. A populist "tea party" revolt is forming, aimed not only at big government but also big business. At the same time, you've lost your ability to ram whatever you want through Congress.

My money says you use your control over regulation to push a populist agenda. There are several ways that could impact cattle producers. The Environmental Protection Agency has a few thousand regulations pending at any given moment, and this administration is full of people ambivalent about cattle producers' financial well-being. In fact, some think cattle producers and the beef they produce is downright evil.

What would you do? Mr. President, why wouldn't you push a regulatory agenda that is hard on the "fat cats" and corporations? Where you can identify a wedge between the haves and have-nots, big and little—like, say, the intramural rift over the structure of the beef industry—why not get your regulation writers to hammer the wedge deeper to prove you're for the underdog?

That's what I would do. And, wherever possible, I'd seek areas where I could get some Republicans to go along. Several GOP senators support a ban on packer ownership of cattle so a supermajority isn't needed to pass legislation. The same senators also worry about the impact of contractual agreements on cattle prices.

The ball is already rolling. The USDA and DOJ hearings appear to be designed to rewrite the rules governing producer and processor interactions. Those hearings aren't just about beef. They're also about poultry contracts and seed patents—issues in agriculture that have led to so many years of industry squabbling, pitting the "family farm" (populist) lobby against mainstream agriculture.

I called Fred Stokes, president of the Organization for Competitive Markets, after the Massachusetts election. He's as wired into the current agricultural parts of the administration as anyone I know. He believes a big culprit in the consolidation of agriculture is the marketing structure—specifically, grocery retailers ("the Wal-Marts"), which he says have so much buying power they are forcing low prices onto packers, dominoing down to cow–calf producers "who have been bleeding for years with nobody noticing."

Government regulatory reform is the "only way we'll get anything" done given the current ag leadership in Congress, he says.

I'm a lot closer to agreeing with him than the "kill the packer" attitude I hear from the populist side. While we're probably too late to change the way poultry and pork are marketed, Stokes and some members of the administration hope there is still time to keep beef from using the efficiencies those industries enjoy.

My concern is that in their efforts to save beef producers, they will prevent beef from using the same tools the competition uses. Adding new burdens and costs to packers won't translate to higher cattle prices.

Division among cattle producers gives politicians cover to do whatever they want and claim we asked for it. What politician wouldn't take advantage of that in troubled times?